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The Long-Run Behaviour of the Terms of Trade between Primary Commodities and Manufactures

  • Otero, Jesús

This study examines the Prebisch and Singer hypothesis using a panel of 24 commodity prices from 1900 to 2010. The modelling approach stems from the need to meet two key concerns: (1) the presence of cross-sectional dependence among commodity prices; and (2) the identification of potential structural breaks. To address these concerns, the Hadri and Rao test (2008) is employed. The findings suggest that all commodity prices exhibit a structural break at different locations across series, and that support for the Prebisch and Singer hypothesis is mixed. Once the breaks are removed from the underlying series, the persistence of commodity price shocks is shorter than that obtained in other studies using alternative methodologies.

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File URL: http://www.wider.unu.edu/stc/repec/pdfs/wp2011/wp2011-071.pdf
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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Research Paper WP2011/71.

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Length: 25
Date of creation: 2011
Date of revision:
Handle: RePEc:unu:wpaper:wp2011-71
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  1. Giulietti, Monica & Otero, Jesus & Smith, Jeremy, 2006. "Testing for stationarity in heterogeneous panel data in the presence of cross section dependence," The Warwick Economics Research Paper Series (TWERPS) 758, University of Warwick, Department of Economics.
  2. Josep Llu�s Carrion-i-Silvestre & Tom�s del Barrio-Castro & Enrique L�pez-Bazo, 2005. "Breaking the panels: An application to the GDP per capita," Econometrics Journal, Royal Economic Society, vol. 8(2), pages 159-175, 07.
  3. Powell, Andrew, 1991. "Commodity and Developing Country Terms of Trade: What Does the Long Run Show?," Economic Journal, Royal Economic Society, vol. 101(409), pages 1485-96, November.
  4. Zanias, George P., 2005. "Testing for trends in the terms of trade between primary commodities and manufactured goods," Journal of Development Economics, Elsevier, vol. 78(1), pages 49-59, October.
  5. Kellard, Neil & Wohar, Mark E., 2006. "On the prevalence of trends in primary commodity prices," Journal of Development Economics, Elsevier, vol. 79(1), pages 146-167, February.
  6. David I. Harvey & Stephen J. Leybourne & A.M. Robert Taylor, . "Simple, Robust and Powerful Tests of the Breaking Trend Hypothesis," Discussion Papers 06/11, University of Nottingham, School of Economics.
  7. Kilian, L. & Caner, M., 1999. "Size Distortions of Tests of the Null Hypothesis of Stationarity: Evidence and Implications for the PPP Debate," Papers 99-05, Michigan - Center for Research on Economic & Social Theory.
  8. Donggyu Sul & Peter C.B. Phillips & Choi, Chi-Young, 2003. "Prewhitening Bias in HAC Estimation," Cowles Foundation Discussion Papers 1436, Cowles Foundation for Research in Economics, Yale University.
  9. Helg, Rodolfo, 1991. "A note on the stationarity of the primary commodities relative price index," Economics Letters, Elsevier, vol. 36(1), pages 55-60, May.
  10. Chang, Yoosoon, 2004. "Bootstrap unit root tests in panels with cross-sectional dependency," Journal of Econometrics, Elsevier, vol. 120(2), pages 263-293, June.
  11. Stephan Pfaffenzeller & Paul Newbold & Anthony Rayner, 2007. "A Short Note on Updating the Grilli and Yang Commodity Price Index," World Bank Economic Review, World Bank Group, vol. 21(1), pages 151-163.
  12. Mariam Camarero & Josep Lluís Carrion-i-Silvestre & Cecilio Tamarit, 2010. "Does Real Interest Rate Parity Hold For Oecd Countries? New Evidence Using Panel Stationarity Tests With Cross-Section Dependence And Structural Breaks," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(5), pages 568-590, November.
  13. David I. Harvey, & Stephen J. Leybourne, & A. M. Robert Taylor, 2006. "A simple, robust and powerful test of the trend hypothesis," Discussion Papers 06/01, University of Nottingham, Granger Centre for Time Series Econometrics.
  14. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
  15. Seong, Byeongchan & Mahbub Morshed, A.K.M. & Ahn, Sung K., 2006. "Additional sources of bias in half-life estimation," Computational Statistics & Data Analysis, Elsevier, vol. 51(3), pages 2056-2064, December.
  16. Campbell, J.Y. & Perron, P., 1991. "Pitfalls and Opportunities: What Macroeconomics should know about unit roots," Papers 360, Princeton, Department of Economics - Econometric Research Program.
  17. Cuddington, John T & Urzua, Carlos M, 1989. "Trends and Cycles in the Net Barter Terms of Trade: A New Approach," Economic Journal, Royal Economic Society, vol. 99(396), pages 426-42, June.
  18. David I. Harvey & Neil M. Kellard & Jakob B. Madsen & Mark E. Wohar, 2010. "The Prebisch-Singer Hypothesis: Four Centuries of Evidence," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 367-377, May.
  19. Tae-Hwan Kim & Stephan Pfaffenzeller & Tony Rayner & Paul Newbold, 2003. "Testing for Linear Trend with Application to Relative Primary Commodity Prices," Journal of Time Series Analysis, Wiley Blackwell, vol. 24(5), pages 539-551, 09.
  20. Ardeni, Pier Giorgio & Wright, Brian, 1992. "The Prebisch-Singer Hypothesis: A Reappraisal Independent of Stationarity Hypotheses," Economic Journal, Royal Economic Society, vol. 102(413), pages 803-12, July.
  21. Ghoshray, Atanu, 2011. "A reexamination of trends in primary commodity prices," Journal of Development Economics, Elsevier, vol. 95(2), pages 242-251, July.
  22. Cuddington, John T., 1992. "Long-run trends in 26 primary commodity prices : A disaggregated look at the Prebisch-Singer hypothesis," Journal of Development Economics, Elsevier, vol. 39(2), pages 207-227, October.
  23. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
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